MORE than 7,000 jobs were lost last year as the construction industry in Wales suffered a 13% fall in output, according to a new report.

Industry leaders said the contraction was caused by a ‘perfect storm’ of public sector spending cuts and a lack of investment from the private sector.

The figures are reported in today’s Construction Skills Network (CSN) report – the industry’s annual forecast prepared by CITB-ConstructionSkills with input from employers across the UK.

The fall in output of 13% in the past year wipes out the 6% growth seen in the Welsh construction industry in 2011 and 1% growth identified by the report in 2010.

As a result of the contraction the report estimates that 7,080 Welsh construction jobs were lost in the course of the year.

Across the UK as a whole the report suggests there were more than 60,000 construction jobs lost during the year, as UK output fell by 9%.

However, despite the grim figures from 2012 the report suggests a more positive outlook for the coming five years.

Forecasts in the report suggest output will rise at an average rate of 2.7% per year, between now and 2017 – substantially above the 0.8% UK average.

The new work sector is expected to see markedly stronger growth with repair and maintenance output also increasing, by an annual average of 3.6% and 0.3% respectively over the forecast period. This growth is almost entirely due to work starting on the new nuclear reactor at Wylfa in Anglesey from 2016 – without this vital project, Wales’ average annual output growth rate will fall to just 0.6% over the five year period.

However, the report notes that output is recovering from a low base following its decline in 2012, meaning the industry still has a long way to go until it recovers.

And while output if expected to see a strong return to growth towards the end of the forecast period, employment is expected to decline 1.5% annually – corresponding to a loss of around 3,560 jobs over the period – due to the lag between output and employment growth in Wales.

Construction industry employment in Wales is expected to stabilise from 2015 onwards, but while there are forecast to be 92,910 construction workers employed by the end of 2017, this will be 23% below its 2007 peak.

The report also suggests some occupations will fare better than others between now and 2017, with plasterers and dry liners expected to see average annual growth of 1.4% and surveyors 1% growth per year, whilst specialist building operatives will suffer the largest average annual decline of 4.3%. Wales’ annual recruitment requirement will remain high at 2,950 to replace those leaving the industry – accounting for 3.1% of Wales’ total construction employment projected for 2013 – significantly above the UK figure of 1.2%.

Not surprisingly, the biggest anticipated growth area between now and 2017 is infrastructure, providing Wylfa goes ahead from 2016, with average growth of 14.3% per year. The private housing sector is also expected to grow by an average 3.1% annually as Wales’ economic performance improves and job concerns ease over the next couple of years.

The commercial and industrial construction sectors are expected to only see modest average annual growth (1.4% and 1.8% per year). The public non-housing sector is expected to see an average decline of 1.6% per year with growth expected to return in 2015 with large scale projects such as the £1.4bn 21st Century Schools programme and the £106m Ysbyty Glan Clwyd redevelopment in Rhyl.

Other projects in the pipeline include the £273m new specialist critical care center at Torfaen and the £108m new mental health unit at Llandough hospital in Cardiff.

Wyn Prichard, Wales Director for CITB-ConstructionSkills, said: "Construction found itself at the heart of a ‘perfect storm’ in 2012 – hit hard by a combination of public sector spending cuts and a lack of investment in the private sector. Client and consumer confidence are low and are keeping growth levels down.

"Unfortunately all of these factors have had severe consequences for the construction industry in Wales, with the CSN predicting further contractions in employment over the next four years.

"Given some cautious optimism for Wales there is still a long way to go and it is vital that the Welsh Government has recognised the construction industry as critical to the future of Wales’ economy. As the leading skills body for the construction sector, we look forward to working closely with Welsh Government, the Construction Sector Panel, stakeholders and employers to add value during these tough times, bringing planned activity forward quickly, aiding further growth on a local and national level."

But Milica Kitson, chief executive Constructing Excellence in Wales, a body which promotes excellence in the built environment through collaborative working, said there was support for the sector from the Welsh Government.

"Despite the fall in construction output, the industry in Wales has a lot to be positive about," she said. "For the first time in many years we have a clear programme of capital works from Government; we know that the whole of the Welsh supply chain – including the smaller firms that often suffer the most during the tough times – will be in line to benefit as major projects such as hospital, new schools, electrification of the railway and widening of the M4 gather momentum.

"Backing the public sector is a commitment from Government to work collaboratively – to make sure projects are managed in such a way that targets on waste, low carbon and community benefits are all achieved. In other words, Welsh construction is being backed in 2013 in a way it has not enjoyed before. Our political leaders know that Wales has the skills and the firms to build itself out of recession. Indeed, there are some major opportunities – not least the potential to inject around £6bn into the economy through the energy efficiency refurbishment of 1.25 million homes in Wales."